Households gain in carbon plan

Low- to middle-income earners stand to benefit from two rounds of tax cuts, with business assistance starting to decline in three years and only minimal assistance to the energy ­sector, under proposals for a carbon price by the government’s key ­climate change adviser.

Finding that households would ultimately bear the full cost of a carbon price,
Ross Garnaut
used his final report on global warming yesterday to advocate raising the tax-free threshold from $6000 to $25,000 for incomes under $80,000, a 1.3 per cent increase in the pension and an energy efficiency assistance scheme.

Business assistance, however, would fall from 35 per cent of carbon tax revenue to just 20 per cent by 2020, enabling a second round of personal tax cuts within three to five years. The electricity sector would receive only 3 per cent of the revenue, with Professor Garnaut saying the industry would pass all of its cost increases through to consumers.

Backing a $26-a-tonne starting price, which would raise $11.5 billion in the first year, he also suggested Australia’s proposed 2020 emissions reduction target to 5 per cent less than they were in 2000, could be raised to match other developed countries, now at 10 to 16 per cent. And in a direct attack on business critics of the proposed carbon scheme, Professor Garnaut hit out at the Business Council of Australia,
BlueScope Steel
and
BHP Billiton
for promoting a “vested interest" rather than the national interest.

“We have slid back into old political culture," he said. “It is a struggle between the influence of vested interest on policy and the influence of the national interest. Parts of big business have taken on the role of spoiler."

The BCA said it needed more certainty about the carbon scheme, while BlueScope chief executive
Paul O’Malley
accused Professor Garnaut of having an “anti-manufacturing agenda". “Garnaut’s attitude appears to be that if you work in the manufacturing sector in Australia, you don’t deserve to have a job," he said.

Professor Garnaut also took aim at the Coalition’s opposition to a carbon price and its “direct action" policy to tackle climate change.

But Opposition Leader
Tony Abbott
immediately seized on Professor Garnaut’s comments to accuse the government of lying after ministers had been emphasising that only the top 1000 polluting companies would pay the price. “Who pays? Big polluters or households? The truth is households," Mr Abbott said.

Related Quotes

Company Profile

After the release of the report, Prime Minister
Julia Gillard
said tax cuts were a serious option, but government sources also indicated Labor was unlikely to support tax cuts limited to people earning under $80,000.

The BCA last week urged Labor to adopt a low starting price of $10 a tonne and also fully shield all emissions-intensive, trade-exposed industries from its impact.

Responding to yesterday’s report, the business lobby group said it was essential emissions reduction policies implemented did not make Australia unattractive to investors, as it was investment in new technologies that would enable emissions reduction.

“The BCA has sought to engage constructively with government and others in what is a complex debate on how to reduce global greenhouse gas emissions and embark on a long-term structural reform of the Australian economy in a manner that ensures Australia remains competitive and there are not unnecessary job losses," BCA deputy chief executive
Maria Tarrant
said.

“In the absence of any detail from government about the length of its proposed fixed-price period, the triggers to move to an emissions trading scheme or the emissions reduction targets, the BCA has called for a low starting price and a modestly increasing trajectory to reduce the need for compensation to both business and households and provide the capacity for businesses to invest in lower-emissions technologies."

But in his report, Professor Garnaut said the BCA had gone backwards since the 1990s when it “dealt itself into serious discussion of policy reform".

“It is not logical to be in favour of a market-based mechanism for reducing emissions, as the Business Council professes to be, and simultaneously be against a carbon price that discourages any investment," the report says.

In his speech to the National Press Club to release his report yesterday, Professor Garnaut said since his last reporting in 2008 the benefits of avoiding climate change had increased and the cost of tackling it reduced due to low-emissions technologies emerging faster than previously assumed. It was also now “beyond reasonable doubt" that human activity was causing global warming.

But while the current economic conditions were a good time for structural reform, the mining boom and the high Australian dollar made it politically difficult.

In particular, companies such as BlueScope Steel were using the carbon price to “duck the consequences of the resources boom", he said.

“The current government has taken on the most difficult and long-dated policy reform that has ever been attempted in Australia," he said.

“Let’s not let a genuine issue of pressure on all export and import competing industries outside of the resource sector . . . get mixed up with false concern over carbon pricing.

“Let’s not blame the protection of our grandchildren against the dangers of climate change for loss of jobs and investment caused by the resources boom."

Professor Garnaut said that while BHP-Billiton had publicly backed a carbon price, his report said it was only endorsing a marked-based mechanism that did not apply to two large components of its business – oil and gas. BHP declined to comment.

Environment lobby group The Climate Institute said the report “pulled the rug, floorboards and foundations from the myth" that Australia was at risk of leading the world on tackling climate change.

“Garnaut suggests existing international action would see Australia taking on a minimum 10 per cent pollution target and argues we should have the flexibility to achieve our 25 per cent target by 2020," chief executive
John Connor
said.

“At the end of the day the real test for any agreed pollution package will be whether Australia’s pollution levels are falling and whether we are driving domestic transformation and investment in Australia’s world-class, clean energy resources."

The final Garnaut report confirms most of the recommendations he has made this year to the parliamentary committee that is negotiating details of the carbon tax as he has updated his initial 2008 report.

He recommends providing industry assistance in the first three years based on levels proposed through Labor’s initial attempt at a climate scheme, which was junked in 2009. But after this time it would fall and an independent agency would determine assistance on the difference in sale prices between Australian companies and those of competitors without similar carbon constraints.

A significant new part of the report is a proposed 10-year budget for use of carbon revenues. It recommends that 55 per cent of revenue initially go to households in tax cuts, benefit payments and energy efficiency payments ($400 million over four years), rising to 60 to 65 per cent in 2021.

By contrast Labor’s original carbon pollution reduction scheme increased the percentage of assistance going to industry over time.